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ARTICLE · 26 MARCH 2024

Depreciation Recapture Issues In 1031 Exchanges

Greenberg Glusker LLP
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Many in the real estate industry are familiar with the term cost segregation study. A cost segregation study identifies components within buildings that can be depreciated...

United StatesReal Estate and Construction
Michael Wiener
Michael Wiener
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Many in the real estate industry are familiar with the term cost segregation study. A cost segregation study identifies components within buildings that can be depreciated over shorter periods than the 27.5 and 39-year periods that typically apply to real estate. This allows taxpayers to defer taxes through accelerated depreciation deductions. Many components identified in a cost segregation study are eligible for bonus depreciation. Eligible property placed in service between 2017 and 2022 was eligible for 100% bonus depreciation. Under current law, bonus depreciation is being phased out from 2023 to 2027. However, legislation recently passed by the House of Representatives would extend 100% bonus depreciation from 2023 through 2025.

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